An attempt by Ireland to ease its debt burden was thrown into disarray early on Thursday as the government scrambled to introduce emergency legislation to liquidate Anglo Irish Bank, the failed lender, without having secured a key debt swap deal with the European Central Bank.
The government had intended to announce the liquidation of the bank alongside a deal with the ECB on replacing €28 billion in costly promissory notes, used to bail out Anglo Irish in 2009. But leaked reports of its plans on Wednesday afternoon forced the government to go ahead with the liquidation before reaching agreement in Frankfurt on replacing the notes.
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The promissory notes have become a lightning rod for public anger over austerity and Ireland's treatment in its international bailout at the hands of the euro zone authorities, particularly the ECB. The annual payments of €3.1 billion to repay interest and principal are more or less equivalent to the value of austerity measures implemented by Dublin each year.
The outline of the Irish proposal to replace its promissory notes remained vague but appeared to involve replacing them with sovereign bonds that would be cheaper to service and could potentially serve as collateral for ECB funding, ending a period of so-called Emergency Liquidity Assistance that the Anglo Irish rump has relied on and is subject to fortnightly reviews by the ECB.
Even if the ECB agrees to the proposal, a deal risks being seen as too little amid widespread domestic calls for an outright debt writedown rather than making the debt cheaper to service.
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"You're winding up the bank minister, but you're not winding up the debt," Pearse Doherty, Sinn Fin's finance spokesman, said in rowdy parliamentary session that went into the early hours of Thursday morning to liquidate the bank before daylight, when bondholders might attempt to stop the liquidation.
The rush to liquidate the bank prompted accusations in the Dil of serious fumbling by the government. Michael D. Higgins, president, flew back early from a trip to Italy in order to be available to sign the legislation into law if it is passed.